This stock’s surged almost 10%! Should you buy it for your ISA?

Looking to load up your ISA? Royston Wild looks at a surging share in start-of-week business and considers whether it’s worthy of your investment cash.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Investor appetite was quite tepid on Monday morning, with UK share markets flatlining from last week’s close. It’s no surprise, as Covid-19 uncertainty keeps all us ISA investors guessing. One share that’s not suffering from weak stock-picker appetite, however, is Pendragon (LSE: PDG).

The retailer’s shares are up close to 10% in start-of-week business, putting it at its most expensive for five weeks. News that Dietmar Exler, current chief operating officer of AMB Sports & Entertainment, has been parachuted in as an independent non-executive director has boosted hopes of a turnaround for the embattled auto seller.

Exler has considerable expertise in the car industry. His former roles include president and CEO of Mercedes-Benz USA, as well as head of region at NAFTA Mercedes-Benz.

It’s the latest move intended to beef up Pendragon’s board. Bill Berman was appointed chief executive in mid-February following a run as the company’s interim chairman. Berman was previously head of AutoNation, the biggest car retailer in America.

Giddy!

No disrespect to Exler, but I fear today’s intense buying of Pendragon’s shares is a huge overreaction. The car giant’s problems are significant. I, for one, would want to see a significant upturn in market conditions before I buy it for my ISA. As it stands, news flow continues to get worse and worse.

Trade over at the FTSE 250 firm has long been in the doldrums. Brexit uncertainty has smacked demand from private and commercial customers in recent years. And the possibility of a no-deal withdrawal from the European Union at the end of 2020 casts a shadow over sales for much of the new decade.

The coronavirus outbreak has made the Brexit impact look like small potatoes though. Data from the Society of Motor Manufacturers and Traders showed new vehicle transactions collapsed by almost half in March. Latest figures on UK household finances suggest sales of big-ticket items like new and used autos will continue to struggle too.

According to IHS Markit, Britons’ sense of financial wellbeing has weakened to its worst since November 2011. A reading of 34.9 for April also represented the largest month-on-month drop since records began in 2009.

The letters ISA (Individual Savings Account) on dice on stacks of gold coins on a white background.

A poor ISA pick

In line with government guidance, Pendragon has shuttered all of its retail sites in Britain. It’s unclear when showrooms will be opened to the public again. But even when the doors are unbolted, there won’t be a throng of people flooding onto its forecourts if mass unemployment and widespread corporate failures materialise.

So forget about City forecasts that Pendragon will flip back into profits this year from 2019’s losses. Treat predictions of an 84% earnings boom in 2021 with a considerable pinch of salt.

The retailer’s cheap price, illustrated by a forward P/E ratio of below 9 times, reflects its high-risk profile for this year and beyond. There are much, much better shares to fill your ISA with today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Pendragon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

A pastel colored growing graph with rising rocket.
Investing Articles

Here’s how long it’s taken £1k of Nvidia stock to turn into £10k today!

Our writer explains how money invested in Nvidia stock less than three years ago has grown in value over tenfold…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
US Stock

3 red flags I’m seeing right now for the S&P 500

Jon Smith points out some concerns he has with the S&P 500 at current levels and picks one stock he's…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

UK dividend shares are outperforming US tech stocks!

UK dividend shares aren’t just for passive income investors. Over the last 12 months, they’ve been outperforming their US tech…

Read more »

DIVIDEND YIELD text written on a notebook with chart
US Stock

Here’s how much passive income an investor could make with £2k in Meta stock

Jon Smith looks at Meta stock from a different angle to normal, considering it as an option for an investor's…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

1 of my top UK shares is up 15% in a day! Is it still a buy for me?

Celebrus shares are soaring after strong full-year results. At a P/E ratio below 13, is it one of the best…

Read more »

Close-up of children holding a planet at the beach
Investing Articles

£10,000 invested in Jet2 shares 2 years ago is now worth…

Jet2 shares have surged in recent months and finally appear to be pushing towards fair value. Dr James Fox shares…

Read more »

piggy bank, searching with binoculars
Investing Articles

This FTSE 100 blue-chip could rise 26% in 12 months, according to brokers

While this FTSE 100 dividend stock has put investors through the wringer in recent years, some analysts see brighter skies…

Read more »

Businessman hand stacking money coins with virtual percentage icons
Investing Articles

A 3-step passive income strategy to target major wealth

Want to invest in the stock market to build up a passive income stream? There's no fiendlishly complex multi-step mystique…

Read more »